A Blog That Will Save You Thousands When You Try to Sell Your Old Victorian Home 513 772 1045

Monday, July 20, 2009

Respond in Haste, Repent at Leisure: Don't Hastily Return the Cincinnati Area Board of Realtors, Inc.'s Contract to Purchase

(c) 2009 F. Bruce Abel

Don't try this on the buyer's offer on your home!

Don't counteroffer without clicking on the above pages and inserting the wording that you want set forth below.

You've been waiting and waiting for an offer on your home. You finally get one. It comes on the Cincinnati Area Board of Realtors, Inc. form -- a "standard contract" form.

Are you ready with a similar "form" of a counter-offer? Of course not.

The Good:

First thing though, you have the beginnings of a deal in writing! So, no matter what, you have something important in hand. With a signature!

Now you must quickly cross-out and initial and submit amendments on your own page.You must prepare a counter-offer.

Your realtor is pressuring you to respond quickly using the existing form.

Your resulting counter-offer is crucial. If done right, following your counter-offer, the final contract assures that your deal will go through to closing without grief and anxiety. If not done right the wait until closing will seem like an eternity.

Your realtor is short as an adviser on the counter-offer.

But, because already you anticipate a 6% commission, you feel you have no more money to waste on a lawyer.

Inapplicable clauses can be crossed out and initialed by the parties on the form. Small insertions can be written in and initialed, and

large insertions can be added by way of addendum." Stephen D. Richman, Esq., Columbus, Ohio

Having recently gone through the process of selling our older Victorian home and dealing with the Cincinnati Area Board of Realtors, Inc. “Contract to Purchase,”

I, (a lawyer),

opine

you will find yourself, in your rush to do a "counter-offer," misperceiving the nature of the contract, unnecessarily lowering your sales price and giving the buyer a free option for the duration of the contract period.

The reason for the problem: The Cincinnati Area Board of Realtors, Inc. Contract to Purchase's has two related failures, which you have to make a slight jump of logic and explanation, to understand:

(1) a failure to define “material defect,”(in Par.14 of the Contract to Purchase) giving the buyer, (under that Par.14), when you read it carefully, a free option to "walk away" on the deal using the "inspection" as the excuse, and

(2) a concommitant flaw in the “earnest money” provision (Par.4)failing to release the depositto the sellerwhen the buyer just walks away, giving him the "option" described above.

Your realization of the problem I describe will allow you to bargain effectively to save thousands of dollars. In othere words if you are reading this blog you already will save yourself thousands of dollars in the selling of an older home.

Readers who do not read this blog most likely will (unknowingly) accept the status quo and give away the free option to the buyer: will immediately start negotiating against themselves by lowering their asking price, thinking they are working with two-way contracts that are valid.

One thing you must do is:

Read your offer at leisure.

How do this? Get the form from your realtor now, before the offer comes in. Or, for the one in effect in 2008, click on the pages copied at the beginning of this blog and print them out.

Then do not negotiate the sales price down on the same Cincinnati Area Board of Realtors, Inc Contract to Purchase until you have submitted your strikeouts and separate Addendum Sheet, pursuant to advice from an attorney.

Your realtor views the Standard Form Contract as a ticket to a sale! He will not/cannot explain the flaws I describe until the buyer wants to walk away. Then he will say, "Oh yeah, I forgot to tell you, he can walk away under the wording of the contract."

So what if most deals go through with the flawed "contract" described, unaltered, just like 1/2 the time the roulette wheel comes up red when you've bet on red.

If the written offer comes, as is likely, during the peak showing season, and you have not adjusted the Cincinnati Area Board of Realtors, Inc. Contract to Purchase contract,

you will have wasted that period without getting paid for the option by the buyer if the deal does not close.

Under the Cincinnati Area Board of Realtors, Inc. "Contract to Purchase" deposits of the buyer made when his offer comes in will only be paid to the seller by joint agreement of the buyer and seller, usually after litigation, and it is too expensive to litigate.

Having said the above, it is true that in many cases ignorance is bliss and the involvement of a lawyer itself could be a hinderance, or a waste of money in the 20% of cases where a flawed contract process is neutral (i.e. you have an unsophisticated buyer who does not see that he has a free option whether to buy the property or not) which exists at the encouragement of your realtor. And the cost of a lawyer will range from $300 to $600.

By the way a rising market masks the problems I describe above, so your prior experience of successfully closing on a sale of your home in the used-to-be-normal rising market does not apply.

If you are a buyer in this market, thank the Cincinnati Area Board of Realtors, Inc. and take advantage of the free option given to you by the Cincinnati Area Board of Realtors, Inc.’s Contract to Purchase!

Timewise, when you get your first offer, is it realistic or even possible to send the offer immediately to your attorney? No, especially if you have no lawyer on call to begin with. Even then, is it realistic in light of the short deadline contained or implicit in most offers? No.

Other offers could come in but in fact realtors stay away from them.

Here's one of my early stabs at "correcting" the real estate inspection contingency which is better but does not really do the job (remember I am not disclosing in this blog my best solution):

You may certainly cut and paste this into your counter-offer:

14. REAL ESTATE INSPECTION CONTINGENCY: For purposes of this clause, time is of the essence. Buyer has the option to have the Real Estate inspected at Buyer’s expense. If the buyer obtains an inspection of the Real Estate, on or before twelve (12) calendar days (Inspection Period) following written Contract acceptance, and if the inspection reveals a material defect(s) and Buyer wants to request corrections, Buyer shall deliver written notification of the material defect(s) along with the relevant portion(s) of the inspection report(s) and the corrections desired, to Seller within the Inspection Period. Upon delivery of the notice, Buyer and Seller shall have five (5) calendar days (Settlement Period) to negotiate to reach a written agreement in settlement of the condition of the Real Estate. If settlement is not reached within the Settlement Period, then this Contract shall be null and void. For purposes of this paragraph, "material defects" do not include minor, routine maintenance items nor functions unique to houses of such an age.

Another thing that could be tried for an older home is "as is" language for Par. 14 and Par. 16, rather than "material defect." Par. 14 merely could be rewritten to say "This property is being bought "as is" as it is an old Victorian house.

Another draft, better than the Cincinnati Area Board of Realtors, Inc. provision:

STANDARD SELLER’S ADDENDUM

This Seller’s Addendum is attached to and is a part of the Offer. The Seller’s Addendum will supercede the Sales Contract where inconsistent. The following terms and conditions are accepted and incorporated into the Sales Contract, subject to the following: Paragraphs in the Sales Contract (offer) which require initials by all parties, but are not initialed by all parties, are excluded from the final agreement.In ¶14 the Buyer’s Inspection Report must be the report in full, with pictures, signature page of the expert, and vitae of the expert. It must include the address and telephone number of the expert and his company, including zip code.In ¶16 the Buyer’s Inspection Report must be the report in full, with pictures, signature page of the expert, and vitae of the expert. It must include the address and telephone number of the expert and his company, including zip code.Any radon test must be done on the first floor of the house since the basement is not finished and is uninhabitable.Delivery of notice to the buyer must be direct, not through the Realtor, and can be by email or fax (babel2@fuse.net or 513 772 7991).In ¶ 16 if the buyer and seller cannot agree regarding the radon issue the parties will split the cost to remediate rather than the entire contract made void.

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